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The Ivey PMI rose to 55.3 in February, surpassing both the previous 47.1 and the expected 50.6, signaling stronger expansion in the Canadian economy. Meanwhile, the Ivey PMI n.s.a. (not seasonally adjusted) increased to 53.6, up from the previous 46.2, reflecting a solid rebound in business activity and improved economic conditions.

Canada's retail sector saw a strong recovery in December, with core retail sales surging by 2.7%, exceeding the expected 1.7% and rebounding from November’s -0.7%. Overall retail sales rose by 2.5%, well above the forecast of 1.6% and a significant improvement from November’s 0.2%. This sharp increase signals renewed consumer spending and economic momentum.

Canada’s inflationary pressures strengthened in January, with the Industrial Product Price Index (IPPI) rising 1.6% MoM, doubling the 0.8% forecast and accelerating from 0.4% in December. On an annual basis, the IPPI surged 5.8% YoY, up from 4.1% in the previous month. Meanwhile, the Raw Materials Price Index (RMPI) jumped 3.7% MoM, exceeding the 2.4% estimate and significantly higher than 1.3% in December, pushing the RMPI YoY to 11.8% from 9.1%. In contrast, housing price growth remained muted, with the New Housing Price Index (MoM) declining 0.1%, missing the 0.1% expectation and matching the previous month’s drop, signaling continued softness in the housing market.

Canada's inflation showed a slight uptick in January 2025, with the Consumer Price Index (CPI) rising 1.9% YoY, slightly above the 1.8% forecast and previous reading. On a monthly basis, CPI increased by 0.1%, which is in line with expectations, and rebounded from the decline of -0.4% in December. Core CPI, which excludes volatile items, climbed 2.1% YoY, up from 1.8% in the prior month, while the Core CPI (MoM) rose 0.4%, reversing the -0.3% drop in December. The data suggests inflationary pressures are stabilizing but remain below the Bank of Canada's target range.

Canada's housing market remained stable in January 2025, with Housing Starts reaching 239.7K, slightly below the expected 251.0K but an improvement from the previous 232.5K. Meanwhile, Foreign Securities Purchases increased to 14.37B in December, surpassing forecasts of 14.23B and up from 13.84B in the prior month, indicating continued foreign investor confidence in Canadian assets.

Canada’s housing market showed strong improvement in December 2025, as building permits surged by 11.0% month-over-month, far exceeding the expected 1.6% increase and rebounding sharply from -5.6% in the previous month. The significant rise in permits suggests growing confidence in the construction sector, possibly driven by lower borrowing costs, strong housing demand, or government incentives supporting real estate development.

Canada's labor market showed strong job growth in January, with 76.0K new jobs added, far exceeding the 25.5K forecast but lower than December’s 179.1K. Meanwhile, the unemployment rate improved to 6.6%, beating expectations of 6.8% and slightly lower than December’s 6.7%.

The data suggests a resilient labor market, with stronger-than-expected job creation, which could influence the Bank of Canada’s monetary policy stance in the coming months.

Canada's PMI report for January 2025 showed a weaker manufacturing sector. The Ivey PMI (non-seasonally adjusted) rose to 46.2 from 44.3 in December, indicating a slight improvement but still indicating contraction. Meanwhile, the seasonally adjusted Ivey PMI dropped to 47.1, below expectations of 53.0, and significantly lower than the previous reading of 54.7, signaling continued weakness in the Canadian manufacturing sector.

The Bank of Canada cut the target rate by 25 basis points to 3.0%, in line with expectations. Recent economic data from Canada has shown signs of weakness. Additionally, inflation has been negative for the second consecutive month, and many economists are concerned about the negative impact of Trump's tariffs on the economy. All of this supports the need for easier monetary policy!

Canada's inflation data for December 2024 showed a moderation in price growth. The Core CPI declined by 0.3% month-over-month, a sharper drop compared to the previous -0.1%, reflecting subdued underlying inflation pressures. Annually, Core CPI rose by 1.8%, slightly up from 1.6%, indicating a marginal increase in core inflation trends. The headline CPI also grew 1.8% year-over-year, meeting expectations but slightly below November’s 1.9%, showing steady but softening price growth. On a monthly basis, headline CPI fell by 0.4%, an improvement over the anticipated -0.7%, yet contrasting with the flat reading in November, suggesting seasonal or transitory factors weighed on prices.

The Core CPI (MoM) declined by -0.1%, contrasting with the previous month's 0.4% rise, while the Core CPI (YoY) slowed to 1.6% from 1.7%. Headline CPI (MoM) remained flat at 0.0%, missing expectations of 0.1%, and the CPI (YoY) edged down to 1.9%, just below the forecast and the previous month's 2.0%. The data indicates easing inflationary pressures, which could influence the Bank of Canada's future rate decisions as price growth hovers near the target range's lower end.

The Bank of Canada reduced its key policy rate by 50 basis points to 3.25%, marking the fifth consecutive rate cut in six months and the first back-to-back jumbo cut since the pandemic. Governor Tiff Macklem indicated a shift towards a more gradual approach for future monetary easing, emphasizing that the policy rate is now in the neutral range, neither restricting nor stimulating growth.

Inflation has reached the bank's 2% target, but economic growth remains weak, with Q3 growth at just 1%, below forecasts. The outlook for Q4 and 2025 is also uncertain due to lower immigration levels and potential U.S. tariffs under President-elect Trump, who has proposed a 25% tariff on Canadian exports. Macklem described these tariffs as a "major new uncertainty" clouding Canada's economic future.

The central bank plans to focus on underlying economic trends and consider temporary factors like a sales tax rebate and potential government cash handouts in its policy decisions.